Figure it out

Yankee stock markets had something to impart Wednesday. Listen to the music, they said, not the noise. Watch the flame, not the smoke. And, yeah, focus on the forest, not the trees.

A loss of 600 points in the morning turned into a gain of 200 after lunch. Despite Trump’s trade war, Facebook’s meltdown, Tesla’s breakdown, the Bitcoin bust, tech rout, rising rates and mass shootings, investors decided to look at a different set of numbers. The economy’s growing. Corporate profits are robust. Job creation is strong. Interest rates are still low by historical standards. Military tensions are less. The world’s expanding again. We’re clearly emerging from a low-rate, low-cost, low-return, low-inflation and low-growth world. And stock valuations have come down 10% or 15% and look juicy. So, up she goes.

Smart investors should have ignored the noise of the last six or eight weeks. People with money who want growth would be advised to get it working now, when the cost of good assets has declined, yet the world’s clearly expanding. You will see more of that Friday morning when the latest labour stats roll out. When you stand back, the view improves. Try it.

This week readers will have noticed the steerage section rose in revolt. Let them eat cake, said I. That didn’t help much. Seems a lot of folks think coming here to bitch about real estate will make it fall in value. That last thing they wanted to hear was my view that certain kinds of houses (detached) in select areas (of the 905, for example) which have declined in price substantially (about 30%) are ripe for vultching. No, they will not go down 55% or 70%. And, nope, urban 416 or YVR won’t shed 30%. So before mortgage rates escalate much further, and while sellers are morose and desperate, you might want to jump in with that low-ball volley.

The rabble, sadly, thought this was a capitulation, or a buy signal for every house on every street in every city in the nation. (‘What about Kelowna!’ they cried. ‘Oakville is still obscene!’ ‘Who can afford a house in TO?’ ‘Richmond is a complete joke!’) No matter how many times folks are reminded that all real estate is local, it’s a lost message. So I give up. Buy a house if you need one, crave one and can afford one. Waiting for the market to shed half its value is fruitless. Ain’t gonna happen. Nor did I ever suggest it.

Toronto sales have been running at 40% below year-ago levels for every month so far in 2018. The average price has dipped 17% for detached houses. In sections of the 905, prices are off 35%, while listings have bloated. The average for all houses, even including hot condos, is down 14%. High-end house sales (over $2 mill) have crumbled by almost half.

But, but, but… average prices have risen slightly month/month. Inventory in general has not soared as owners decline to sell into a fading market. Demand is nudging supply, despite the 40% collapse in sales, setting a floor on eroding values. Also key are the factors this blog has been tediously reminding you of – all those frothing moisters who now constitute the largest segment of the population, mortgages still available in the 3% range, the bottomless Bank of Mom and the re-emergence of a world marked by inflation, growth and US expansion.

Figure it out, kids.

And Van? Similar sales story – down 30% last month compared to the spring of 2017, and almost 23% lower than the ten-year average. The Millennial lust for condos continues to power the market, with 61% of available units snapped up in a month, compared with just 14% of detacheds – which saw a 37% decline in sales.

The Dipper price plop has yet to materialize, thanks largely to a 26% goosing of condo values by all of those kids. So, every month the market price of coffinesque apartments creeps closer to single family homes.

As stated here recently, condo buyers are nuts. Risk abounds. But it’s likely not going to stop anytime soon – even as the ridiculous suite of local and provincial taxes knock down the top end of the market. In short, stay away from buying in VYR. But those areas where the spec tax will apply are going to be ripe for vultching in the months ahead.

Let’s summarize: all real estate is local. Parts of the GTA are on sale. Montreal, Halifax and Calgary show value (for different reasons). Ottawa is stable. Condos are a dumb move anywhere. The detached market is swinging wildly. Hamilton is interesting again. Kelowna’s toxic. And only buy if you can afford it.

But waiting for a 70% price collapse when the economy is growing, inflation rising, rates swelling and moisters heaving, is feckless.

Prices will go down until average salaries will start rising. I do not see increasing salaries in the next few years unless corporations will give up on profits to increase salaries which will not happen

You may very well be right Garth but the indications from several contacts through the banks is that in about three quarters of the branches new mortgage applications are down anywhere from 20-30 % in the last couple of months
And with the Fed raising again in a few weeks the pressure on RE is only going to increase globally – REIT indexes are providing a good indication of the bearish outlook for at least the next 6-12 months
Still very dangerous to buy in most of the GTA
Any buyer needs to run renewals at 5% and increase property taxes and all utilities by 30% to get an accurate gauge of what the cost will be 5 years out
And incomes for most in real terms will be flat or down
Amount of energy the sun is emitting is dropping rapidly and we are very likely in the early stages of a multi year extreme cold period which will only serve to increase heating and food bills dramatically
Potential buyers in my view should wait at least until late fall and only buy with a substantial financial cushion
Lower sales = fewer mortgage apps. As I have said (ad nauseum) human nature keeps most people from buying in falling markets. When things tick up, and they rush in. Meanwhile they just moan and gasp. – Garth

The Q1 2018 report that has been dissected and discussed here in not definitive. The real picture will emerge with the release of the Q2 2018 report when we will find out the April/May/ June market numbers. That will be when the rubber hits the road.

In kelowna right now renting is not affordable. We have to find a new place this week or we are homeless. We can’t afford the 2250$ a month at our current place anymore because my working son moved out. There is very little inventory of rentals. One place in Lakeview heights we looked at wanted 2000k for the upper floor and 1600k for the basement/canning kitchen/east german dungeon. When we met the owner i couldnt understand his extreme chinese accent, but my wife kind of knew what he was saying. We couldn’t stay in the house long. It was built in the early sixties and it looks as though the elderly owners rode it out right to the nursing home. The stench of human urine was so strong I had to leave and it actually permeated our clothing till we got out of the car back at home. Then yesterday we went to look at an apartment about 900 square feet or so in a new apartment complex. The child/assistant manager would neither speak loudly enough to be heard or make eye contact during our hectic “tour”. We left once we realized that parking fees alone would be 150$ a month. So basically once our time is up here across from the crack house we moved in beside, we are literally homeless. Having said that, I’m employed in aviation full time and my wife is full time too. It’s not like we don’t have money, it’s just that difficult to find a box to put your bed in that makes sense and fits your needs. I don’t care anymore. If we find something, we find something. If not, uhhh, it’s better than being in enormous debt. Hopefully kelowna rents will soften one day. It’s kind of bizzare how society has gone along with being beaten like this. The most defenseless among us are bearing the brunt of all of this, like single moms and kids just starting out. The pursuit of happiness will have to wait as long as rent is 50% or more of a family’s income. The aphids are dying.

“Stay away from buying in YVR” For how many years have you said that and how much have prices increased?

“That last thing they wanted to hear was my view that certain kinds of houses (detached) in select areas (of the 905, for example) which have declined in price substantially (about 30%) are ripe for vultching. ”

So they more than double and then drop 30% and now is the time to buy?

My last weekend went very interesting. I woke up a bit early from my usual timing, because my college friends were coming to visit me. I brushed my teeth, freshen up. prepared some tea for me and my room mate.And I awaited for them,they arrived at 10.am. We then had our meal and headed for shopping. we buy some winter cloth, a pair of shoes, cap etc. we had fun enjoyed a lot. We were totally exhausted . Then we left for room reached there at 5.30 pm freshen up took rest, watched movie, had dinner. About 11.30 pm we slept. It was a wonderful day.

In kelowna right now renting is not affordable. We have to find a new place this week or we are homeless. We can’t afford the 2250$ a month at our current place anymore because my working son moved out. There is very little inventory of rentals.
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Steve, our daughter has a 3 bdroom top floor of house for rent, fenced yard, pet OK, parking for 2 cars, five minutes from shops, college, hospital, buslines (the basement suite is rented) in Vernon, which is just 35 min away from Kelowna.

If you’re interested in viewing it, I give Garth permission (the matchmaker that he is!) to give you my email address, and I’ll put you in touch with daughter.

And, nope, urban 416 or YVR won’t shed 30% ……………. i think the message was hammered here in the comments section the last few days, if YVR doesn’t shed 30%, those waiting on the sidelines got burned as anything less than 30% correction takes you only back 2 years. Not your fault GT, just saying once again at least admit your previous predictions about YVR were wrong.

Kelowna is cheap IMO. Fast population growth and a great little aiport that can get you direct to Van, Phoenix, Toronto or Mexico. Lots of great communities, Canada best skiing,boating, wineries and golf. I don’t know what the short term will hold but I expect people from all over Canada will continue to retire here, vacation here and commute from here.

And yes homes have shot up the last 2 years but last ten are only up 40% ish. One of the least bubbly cities, you can still buy a very nice home with a view and some land for 700ish. Basically homes at replacement cost.

The Kelowna doomers here missed about 10 years where homes barely budged and sat on the market for 100 days. We get 18 months of the market actually appreciating, and homes selling in decent time frames and they’d have you believe we are in the bubble of all bubbles and that prices are going to pull back 50 percent which would put as at like 2006. Strongly doubt it, but if they do we are going lakefront baby!

I’m a millennial who bought a place in Toronto a few years ago. Sure it was tough laying out that kind of cash, and it was scary thinking prices could fall. But who cares. My wife and I (and maybe kids someday) need a place to live, and Toronto is a great spot.

At least this way we have no jerkoff landlord controlling our destiny.

Ha Garth, come on now. It’s not the end of the world if you acknowledge that this is a bit of a 180. I can’t help but think that people would have been better off buying in YYZ or YVR five years ago, but you were saying don’t… but now you’re saying at least as far as the YYZ is concerned that it isn’t coming down, buy if you must, real estate is local. Anyways, not that I take your advice or anything, but good for a laugh.

Toronto sales have been running at 40% below year-ago levels for every month so far in 2018. The average price has dipped 17% for detached houses. In sections of the 905, prices are off 35%, while listings have bloated. The average for all houses, even including hot condos, is down 14%. High-end house sales (over $2 mill) have crumbled by almost half.
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Agreed, but very few areas of the 905 are off by 30%+ Most are listing at mid to late 2016 prices (10%-15% off-peak). Yes, there are some Greater Fools who are desperate to sell and bargains will be had – but very few. Of course, no harm in vulching, but demand would suggest you won’t be the lone bidder most of the time.

Isn’t what is described above simply the first stage of an asset bubble popping? Isn’t all the action at the bottom? Lot’s of potential sellers quietly sitting on the sidelines waiting for this B20 sandstorm to blow over.

Aren’t we just at the “end of the beginning” in Churchillian?

If we are already licking the bottom April 2018 won’t we be back to late 2016 price levels somewhere by March 2019?

An average, Canadian home prices need to roll back by 30-35% of 2016 levels to get us anywhere close to the asset mean adjusted for inflation.

All assets revert to their mean over time. Unproductive assets even more so.

In order for the bullish housing predictions made by the fellow who took over from the gentleman who used to write this blog to hold up in the long run, there would have to be massive wage inflation. Inflating away debt has been very popular throughout history so I don’t see any reason why that would not happen (other the world currently being run by two presidents for life and reality TV star). Balanced and diversified would be the way to go, I guess. But mobile is a pretty sensible hedge too.

I am actually not bullish on real estate. Just realistically telling people the world has changed. When you see a 30% decline, need a house and can afford it, pay attention. – Garth

#17 Steve on 04.04.18 at 7:02 pm
In kelowna right now renting is not affordable. We have to find a new place this week or we are homeless. We can’t afford the 2250$ a month at our current place anymore because my working son moved out. There is very little inventory of rentals. One place in Lakeview heights we looked at wanted 2000k for the upper floor and 1600k for the basement/canning kitchen/east german dungeon. When we met the owner i couldnt understand his extreme chinese accent, but my wife kind of knew what he was saying. We couldn’t stay in the house long. It was built in the early sixties and it looks as though the elderly owners rode it out right to the nursing home. The stench of human urine was so strong I had to leave and it actually permeated our clothing till we got out of the car back at home. Then yesterday we went to look at an apartment about 900 square feet or so in a new apartment complex. The child/assistant manager would neither speak loudly enough to be heard or make eye contact during our hectic “tour”. We left once we realized that parking fees alone would be 150$ a month. So basically once our time is up here across from the crack house we moved in beside, we are literally homeless. Having said that, I’m employed in aviation full time and my wife is full time too. It’s not like we don’t have money, it’s just that difficult to find a box to put your bed in that makes sense and fits your needs. I don’t care anymore. If we find something, we find something. If not, uhhh, it’s better than being in enormous debt. Hopefully kelowna rents will soften one day. It’s kind of bizzare how society has gone along with being beaten like this. The most defenseless among us are bearing the brunt of all of this, like single moms and kids just starting out. The pursuit of happiness will have to wait as long as rent is 50% or more of a family’s income. The aphids are dying.

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I read your schtick and was not impressed. The problem here has nothing to do with available rentals but with the lack of foresight on your part and your expectations that someone else out there is looking out for you when you aren’t doing it for yourself.

Look, this is how it is. You are indentured to your job because that’s how you pay your bills. If you’re young and just starting out, I get it. You have to start somewhere. In your case though, your grown child left and you didn’t plan things out financially. You thought your grown child would stay forever. Did you really believe that would continue forever? If yes, that was a serious mistake.

Also, if $2,250/month rent based on dual income is considered too high, you’ve made another mistake. You say you and your wife both have jobs. Well, those jobs aren’t cutting it, are they? Time to raise the ambition bar and ask for a raise or get a new job that pays better. Act! Don’t whine! Do something to improve your lot. When I felt my job didn’t provide the financial rewards I expected, I moved on. I believe in always earning a surplus above my lifestyle costs because I’m worth it and owe it to myself.

Lastly, have you saved any money for investments? Yes? No? Maybe? Sounds like the answer may be no. Mistake number 3. You are a slave to your job which doesn’t pay enough for the lifestyle you desire and you have no backup plan (investment portfolio) to cover unforseens (ie: your current situation now that your grown child has left).

I’m not going to sugar coat this (as I’m sure you’ve already noticed so far). Life’s a bitch. It will chew you up and spit you out if you don’t take action and prepare yourself for the crap that happens along the way. Time to think outside your little box of preconceived notions.

Maybe you can’t afford to live in the area where you are living nor have the lifestyle you currently have and wish to retain. That’s too bad and it sucks for you. Tough! There are other areas in the country to live affordably and earn a decent living and have a decnt life. Make a decision! Whatever decision you make will be the right one as once it’s done, there’s no turning back. Just get it done and stop whining. These are first world problems.

Well if you were waiting for retribution and suffering it is all here. Apparently houses are never supposed to go down and our trusted government should come to the rescue for homeowners that contracted for houses in the range of 1-2 million.
If there is even a slight chance of a bailout for any of these morons I am going to lose it.
Get used to these sob stories.

In kelowna right now renting is not affordable. We have to find a new place this week or we are homeless. We can’t afford the 2250$ a month at our current place anymore because my working son moved out. There is very little inventory of rentals.
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Lots of newcomers to Kelowna in the last few years. People cashing out in the Big Smokes and retiring to the Kelowna. Also lots of out of town students in the colleges and temporary foreign workers putting pressure on rentals. The cost of buying or renting here is just crazy in proportion to the average household income.

“The houses they purchased cost between about $1 million and $1.6 million — around the average price of detached, single-family home in the Toronto region.

If they walk away from their contracts with Mattamy, they would forfeit their deposits of more than $200,000. They also risk being sued by the builder that is refusing to provide financial assistance or extend the closings.”

The houses cost between $1 million to $1.6 million? And they’re now whining? Ha ha ha ha ha…

And they want everyone but themselves to save them from…themselves? The Matamy guy was right. Matamy has financial obligations to keep with others and the homebuyers need to fulfill their financial obligations as well. What a bunch of entitled morons!

All of you stock market and real estate pumpers, are the best at beating your own drum. When markets go up, all of you know it all and when markets go down, all of you make Excuses. You try to defend your point of view by magnifying the term “fundamentals”, inorder to sound intelligent, but are you? No different than individuals who say “reiterate” when they could say repeat.

Regardless, do not buy the GTA real estate market and take your chances with the stock markets because the “fundamentals” are in play.

The third couple, Darren and Claudia Evans are second-time Mattamy buyers, who have been living in the area for four years. They wanted a different floor plan for their 2-year-old son so they bought another house for about $1.6 million, expecting their current place to sell for about the same amount.

They listed their house twice last year but received no formal offers, just a phone call with “a lowball” proposal.

“We haven’t put our house on the market again and we need to close in seven weeks. There is no point. We are watching the market so closely with our realtor and we can’t afford to take the amount of money that we will get offered right now. If we got a delay in closing then it would be fine. I’m sure the market will recover in time,” he said.

It seems like this is an argument about where and when it hits rock bottom. Facts are prices have fallen. Rock bottom is irrelevant. When you can afford to buy, you buy. If not then keep diversifying and renting. The long game is about cashflow not capital gains/losses.

#3 TS
“Garth is just playing contrarian here. Hard to know what he believes anymore”
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Hardly! Garth is not ‘playing contrarian’ here – at least not on a full-time basis. You have to understand that it’s near impossible for a Balanced-Investment proponent to advocate any sort of position which may be considered ‘extreme’ (even if it’s only perception).

Even though we have a centuries-old metric of 3-4x gross family income as the accepted limit of ‘affordability’, $500-600k is merely conforming of this approximation and is to be reasonably expected.
However, via recency bias and the anchoring effect, we have accepted valuations in the $1.2-1.5 as ‘normal’!
So, being ‘sane’ is perceived as ‘crazy’, and vice-versa.

Being ‘contrarian’ is truly difficult because first you have to understand fundamentals (ie. valuations), and secondly you have to act against basic psychological traits which have taken hundreds of thousands of years of evolutionary forces to develop. The herding instinct is way more powerful than most people realize!

Very strange to see that Canadians learned NOTHING from what happened in the US and other places. Oh yeah, I forgot.. we’re different here.

A 50% drop in house prices would not even take us back to 2010 prices, when you forecast (in your book Money Road) that real estate values were set to tumble, crash etc. and advised people to plan for the “wild ride ahead” (“Step One: Get out while you can”).

Now that you have changed your tune, I really start to believe house prices will slide.

I was precise about the areas and house types. You are generalizing. – Garth

Why is the average detached house in Toronto 1.2-1.5, in Houston or Austin Texas the average is around $330k. If house prices do not go down much from here in the GTA or Van you might as well put all of your money in the US stock market because at least you can pick and find value here and there, no use to buy now if you missed the housing run up, the worst thing to do want be to be patient all of these years then finally cave in to buy at the top. If GTA real estate is such a deal why do not legendary investors like Sam Zell not see the value.

No, they will not go down 55% or 70%. And, nope, urban 416 or YVR won’t shed 30%. So before mortgage rates escalate much further, and while sellers are morose and desperate, you might want to jump in with that low-ball volley.

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You overestimate
* the extent people who overextended themselves to get into those expensive homes
* the number of people who got down payments from private lenders
* the number of parents who cannot afford to carry their child’s down payment on their HELOC at 5% or 6%
* the number of big banks who knowingly signed mortgages with people who did not qualify by turning a blind eye to the private lender’s down payment mortgage in order to not have to conduct the stress test for people with less than 20% down payment
* the number of people renewing their mortgage who can’t afford a 1% increase in mortgage rates
* the number of condos in the GTA bought by lower-income individuals hoping to sell the assignment or think becoming a landlord with a positive cash flow after rising mortgage costs and maintenance fees is easy
* the number of sub-par condos that will require special assessments or higher than expected maintenance fees to prevent the building or underground parking lot from falling down
* the number of local flippers and speculators who don’t know how they will breakeven to pay for the loans on their investment homes that should have sold for March 2017 or higher prices by now
* the homeowners who bought new homes under construction and still need to sell their current home that is falling in value and secure a mortgage in a rising rate environment
* the number of boomers close to or in retirement who realize a HELOC or reverse mortgage will not help pay all the monthly expenses for the next 30 – 40 years in retirement and need to sell to create a retirement savings plan
* the people who have no savings and have to cut expenses to pay the higher mortgage costs and the ripple effect that will have on the Canadian economy
* how little debt people will be willing to take on as scared homeowners and people with line of credits, hear more stories about lenders refusing to renew mortgages or private lenders drastically increasing the mortgage rates on people who cannot leave them
* the full effect of B20
* the full effect of IFRS 9 – which the world will not amend to accommodate for Canada

Even if people in Ontario started making as much money as people in Alberta during the peak oil boom in Canada, the cost of servicing debt is rising faster than income and the loan to income ratio on many homes is higher than 450%.

I have seen people in the frenzy do very weird things to get their hands on a home or happily lend money as syndicated mortgages and private loans for a chance to make a return of 10% a year, with no regard as to how the subprime borrower was going to pay back the principal investment.

The home prices in the GTA are at the same levels multi-millionaires and billionaires pay in real ‘world-class’ cities. When homes in the GTA have fallen another 40% from their current levels, then I know we have hit the bottom.

it makes more sense to buy in rising market when SFD is rising from $400K than in declining when it’s declining from $1.2 mil

So did you? – Garth

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I did not, I have read somewhere that those prices are too high and not supported by fundamentals and destined to decline…
And now I have to live under the bridge. Well, at least it’s not that cold in BC.

“I’ve been writing on this blog for years that Lower Mainland is untouchable. No Spec tax, B20, etc. is ever going to move the needle downwards. If you can, buy it.”

It takes a particular dumb or uneducated person to bet that ANY market is ‘untouchable’.

Nor do you appear to have many functioning neurons when it comes to investment advice. Buy low, sell high. That rule hasn’t changed for many many years. Not ‘buy at historic extremes of price/rent and price/income ratios’.

Vancouver was a great investment years ago. These days, fraught with peril, and with extremely poor job prospects to go with it.

Twin sister & I just snatched up a Calgary-(Acadia) detached move-in ready house @ $450k-(orig. asking $500k) @ 4.09% x10yr term.
Gotta tell ya, at $25k dp+ per twin, & paying same or less as rent, NO post-purchase recognizance here.
These houses in that area you couldn’t find for <$600k several years ago. Buyers remorse…not

If even 5-10% of condo owners (i.e. Flippers/specuvestors) in YVR head for the exits, the whole house of cards will collapse, and 30% price drops will seem modest, especially in the lower mainland/Fraser Valley, as those buyers who felt these areas were the last they could afford, suddenly discover they can afford to move closer than a 2 hour commute to Vancouver. This will suck much of the demand out of Maple Ridge and Mission, and 70% price cuts in condos would not be beyond the realm of possibility…like you said Garth, all RE is local.

“Even though we have a centuries-old metric of 3-4x gross family income as the accepted limit of ‘affordability’, $500-600k is merely conforming of this approximation and is to be reasonably expected.
However, via recency bias and the anchoring effect, we have accepted valuations in the $1.2-1.5 as ‘normal’!
So, being ‘sane’ is perceived as ‘crazy’, and vice-versa.”

Just a few weeks ago people were running around trying to get into the ‘crypto’ space. Now, only the true believers are riding the graph down into the ‘wtf’ zone. Real estate having ascended higher and faster then Elon Musk’s ego, needs to change reality before the fairy dust wears off. There will be no amazing job fairs in Vancouver to support the house price valuations, perhaps houses will magically start making their own mortgage payments so everyone can buy a house or a few.

Everyone knows house prices are stupid, as such, locals will never become smart enough to buy.

I would love to see a fifty percent drop in prices in the GTA but I have faith that this is just not going to happen. Garth is right some places like Newmarket and Aurora have seen drops of 30 percent and maybe that is the bottom but who knows. Realistically if you are flexible you could low ball a war time bungalow in both of these markets and pick it up for 650k and maybe that’s as good as it gets, I don’t think so but maybe.
If you have held off for years in owning a house and have a family this might be the best time to get going, time has no price. For those of us that can afford to wait then best thing to do is just that.
The best thing to come of this is that I don’t have to listen to house lust stories at cocktail parties and in my world that is PRICELESS.

I think we have to wait until the fall to see if this is truly a fall. I believe there are no experts in this weird market in Canada. We want some major relief for our kids sake, until it suddenly hits our own home prices. Reality bites! Time will tell. I believe the fundamentals of average incomes compared to real estate costs have to line up a little more…….but don’t hurt mine!

Things have definitely changed in the RE market, even in condo market that many claim is so hot. Yes, prices are sticky but no so much. In our building in Yaletown, one unit (1100sf) sold after 4 months at the discount. The seller was asking way too much to start with, made one $50K drop recently and another smaller one just few days ago and the deal was struck. Lucky winner of 1100 sf condo at only $1,180,000. There are three more identical condos on the market in our building. One of them just next door had 4 open houses and crickets… This could not happened few months ago. They would have been sold in a matter of days… just saying. It’s not soo good in the condo market either. Not to mention 40% drop in detached sales in Vancouver year over year….

#53Allover-only in Wynnetario does the buyer of a house priced at almost 2 million dollars demand a taxpayer bailout-I laughed out loud when the HR employee says “we are not investors-we just need a home for the children”-you are paying almost 2 mill for a house and you think you aren’t an investor? Jeez.

TERMINATOR.
Like the Terminator in the movie , Bankers and their evil twins, the Revenue Canada Agents never get tired, for they have Gods work to do.They simply keep coming at you, day in day out. They want their money, and they want it now. They like to work in tandem, gang -attacking. When you try to hide from Revenue Canada , you can rest well assured that with a simple telephone call, their banker allies will freeze your bank accounts rock hard cold. This is a real attention moment. They are tireless, they will hunt you down and bring you in dead or alive. They never ever sleep. They employ snitches. They will turn a trusted friend, even mom and dad against you in a heart beat. As the government requires more and more taxes for vote buying social programs, Real Estate speculators (flippers) and those who like to work for cash will soon get to know the Terminators on a more personal level. Unbelievable as it may seem, shortly these same tax dodge runners will be portraying themselves as innocent victims of the aggression of the Terminators. You can trust me as the teller of truth in the land of gypsies, tramps and thieves.

I’ve followed this blog for probably a decade and I respect the hard work you’ve put into writing all of these posts.

However, to be honest I think the truth is that your track record on housing (in light of your current position and guidance) has been poor. While admitting error and under-performance is hard to do, the reality is that everybody under performs at times. A simple acknowledgement of past miscalculations on this subject would be a breath of fresh air on this blog.

Regardless of the accuracy of the past ~decade of your housing guidance, I still think you have given a lot of sensible financial advice which has helped to educate people – and for that I thank you.

“And Van? Similar sales …” so maybe to buying since only sales to get affected not price.

“In short, stay away from buying in VYR.” Then no to buying..

Would you buy in 900K – 1.4K in North Vancouver or Burnaby now, assuming have 400 K down payment with another 400K in balance portfolio (all our own saving) and 190K combine salary (30 and 36 years old) which will go down in 1-2 year when one and only one kid come in picture.

A $1 million mortgage at 35 with a kid coming in an area that has not yet corrected? You really need an answer? – Garth

You overestimate
* the extent people who overextended themselves to get into those expensive homes
* the number of people who got down payments from private lenders
* the number of parents who cannot afford to carry their child’s down payment on their HELOC at 5% or 6%
* the number of big banks who knowingly signed mortgages with people who did not qualify by turning a blind eye to the private lender’s down payment mortgage in order to not have to conduct the stress test for people with less than 20% down payment
* the number of people renewing their mortgage who can’t afford a 1% increase in mortgage rates
* the number of condos in the GTA bought by lower-income individuals hoping to sell the assignment or think becoming a landlord with a positive cash flow after rising mortgage costs and maintenance fees is easy
* the number of sub-par condos that will require special assessments or higher than expected maintenance fees to prevent the building or underground parking lot from falling down
* the number of local flippers and speculators who don’t know how they will breakeven to pay for the loans on their investment homes that should have sold for March 2017 or higher prices by now
* the homeowners who bought new homes under construction and still need to sell their current home that is falling in value and secure a mortgage in a rising rate environment
* the number of boomers close to or in retirement who realize a HELOC or reverse mortgage will not help pay all the monthly expenses for the next 30 – 40 years in retirement and need to sell to create a retirement savings plan
* the people who have no savings and have to cut expenses to pay the higher mortgage costs and the ripple effect that will have on the Canadian economy
* how little debt people will be willing to take on as scared homeowners and people with line of credits, hear more stories about lenders refusing to renew mortgages or private lenders drastically increasing the mortgage rates on people who cannot leave them
* the full effect of B20
* the full effect of IFRS 9 – which the world will not amend to accommodate for Canada

Even if people in Ontario started making as much money as people in Alberta during the peak oil boom in Canada, the cost of servicing debt is rising faster than income and the loan to income ratio on many homes is higher than 450%.

I have seen people in the frenzy do very weird things to get their hands on a home or happily lend money as syndicated mortgages and private loans for a chance to make a return of 10% a year, with no regard as to how the subprime borrower was going to pay back the principal investment.

The home prices in the GTA are at the same levels multi-millionaires and billionaires pay in real ‘world-class’ cities. When homes in the GTA have fallen another 40% from their current levels, then I know we have hit the bottom.

We’re not there yet.
_________________________________________________________________

I am hearing the SHYSTERS crying about IRFS 9 . The GTA and Vancouver are MONSTER house of cards . Throw in the full effect of B20 and the countless other issues and this housing bubble has alot of air to leak out still. ALOT OF HOT AIR.

Garth does not have a crystal ball. So many people comment day after day: what you think of this house in this situation? How much do you think prices will fall in parry sound/nakusp/alert? He doesn’t know! He never did.

Which 2 year old tells mommy and daddy to change the floor plan of the house. The parents wanted a new home and wanted to sell the older one for the same price and got stuck.

Greed has no bounds and blaming it on the want or need of a 2 year old is beyond comprehension.

God save these folks.

From the Star article:

>> The third couple, Darren and Claudia Evans, are second-time Mattamy buyers, who have been living in the area for four years. They wanted a different floor plan for their 2-year-old son, so they bought another house for about $1.6 million, expecting their current place to sell for about the same amount.

They listed their house twice last year but received no formal offers, just a phone call with a “lowball” proposal. <<

——————
#20 Rental property math on 04.04.18 at 7:14 pm
You guys wanted to see blood in the streets right?
Here you go!

This is only a correction, prices will bounce back. GTA population is increasing. This is the time if you want to buy a house at a discount. Anyone that thinks house prices are going to drop 50% are delusional or truly believes that the economy is going to crash and if that happens we will have bigger things to worry about.

I wonder how bad the condo market will get, the same story about the people owning 2 detached homes, must have also happened to condo owners wanting to downsize to a condo from their detached homes or move up from their existing condos.

‘The number of condo developments under construction in the Greater Toronto Area increased to 215 projects and 58,900 units at year-end 2017. There was also a multi-decade high for purpose-built rental construction, which reached 22 projects and 7,184 units. Total combined apartments under construction of 66,084 units was a new record for the GTA — and it’s about to grow even higher.’

It will take years to wait for all of the condos units to be completed to see how many people are unable to secure a mortgage due to rising interest rates, falling home prices or changes in homebuyer sentiment, as people finally realize owing a lot of money to loan sharks and banks is not a good idea.

Danielle Park, Venable Park Investment Counsel, says, “Buyers Market Spreading in Real Estate” 2018. “Decline in sales typically precede price by a few months”. I see lots of bloggers trying to play down the correction. CTV also.

The nice thing is that this year will be clarifying. Garth’s well enunciated list of headwinds are coming together: rising rate environment, rising household debt levels, OSFI/bank regulations, and rising appetite for government intervention. To this I’d add inevitable tax increases in the GTA.

If these items don’t nuke GTA housing in areas like Regent Park, Jane/Finch, Oakwood/Vaughan, Parkdale, or Mt Dennis, why do you suppose that’d be? Are they home to good schools? Large lots? Safe environments? high quality homes? Great local amenities? I suspect not.

If these areas don’t go down 30-50% it’s simply not worth it to remain in Toronto. It may work out financially in the end, but you can never get back the time you could have spent in a community with better amenities, cleaner air, safer environment, lower taxes, better healthcare, lower public debt, less traffic and perhaps – friendlier people.

The choice is clear. Vultch hard or move out. I am already making arrangements for the latter option. This is the year.

I think Garth is trying to manually pop the bubble by goading the readers to flood the market with low ball offers.

Because I find it really hard to believe that someone so knowledgeable about housing is suddenly satisfied with a minor blip that in values that doesn’t even begin to bring housing prices into reasonable territory. Especially not someone who thought housing was overpriced in 2009. Jesus Christ, just be real with us.

I need to write in crayon, apparently. Where prices for detached have dropped by a third (as stated) and sellers are stressed, why not offer? Study a little history – there has never been a correction of a greater magnitude in the last 50 years. How much clearer does this have to be? – Garth

Vancouver has now been fully recognized by all locals as a world class city. Locals regularly explain to each other why, and affirm the above, which the denizens find calming. The belief is so exhilarating, that the previous government could not help but squeal with delight in tandem with their developer friends at each utterance by the plebs. And as such, as all new gilded eras came to an end. The bubble, she burst.

Stable – because we didn’t have a huge run up like the other markets. RE did rise fairly strongly from 2002 – 2010 in general, but since then any RE rise above 2-3% per annum has only been in select neighbourhoods (certainly not mine…).

#106 crdt on 04.04.18 at 11:02 pm
Vancouver has now been fully recognized by all locals as a world class city. Locals regularly explain to each other why, and affirm the above, which the denizens find calming. The belief is so exhilarating, that the previous government could not help but squeal with delight in tandem with their developer friends at each utterance by the plebs. And as such, as all new gilded eras came to an end. The bubble, she burst.

I need to write in crayon, apparently. Where prices for detached have dropped by a third (as stated) and sellers are stressed, why not offer? Study a little history – there has never been a correction of a greater magnitude in the last 50 years. How much clearer does this have to be? – Garth

————————————-

During the Asian financial crisis in the 1990s, Japan’s housing market crashed. Some areas NEVER recovered.

Purchased for $2.3 million in 1997
Listed for $1.3 million in February 2017

“A group of Oakville homebuyers, struggling to finance the pre-construction houses they bought in February 2017 at the height of last year’s real estate frenzy, are blaming “reckless” provincial housing policy and new mortgage rules for putting them on the brink of financial ruin.”

Twin sister & I just snatched up a Calgary-(Acadia) detached move-in ready house @ $450k-(orig. asking $500k) @ 4.09% x10yr term.
Gotta tell ya, at $25k dp+ per twin, & paying same or less as rent, NO post-purchase recognizance here.
These houses in that area you couldn’t find for <$600k several years ago. Buyers remorse…not
============================

Good luck.

Did you meet all of the principals in Garth's recent post #3,004, with this purchase

So many contradictions in a single post. It must be the exhaustion of dealing with thousands of disillusioned bears.

“But waiting for a 70% price collapse when the economy is growing, inflation rising, rates swelling and moisters heaving, is feckless.”

For ten years, the looming threat of rising interest rates was held up here as the holy grail of measures to prick the market. It was held up when all the other promised federal and provincial measures failed to cool the market – elimination of the 40 year mortgage, increased down payment rules, changes to equity withdraws for second houses, and the recent moister killing B20 rules. We are not even near a path of rate normalization yet, and the buy signal has been given.

Now, waiting for rising rates is pointless, which means the effect of the path to rate normalization was moot from the get go. Got it. Its like Mark Carney circa 2012 all over again crying wolf while the smart piggies bought up real estate.

“Buy a house if you need one, crave one and can afford one. Waiting for the market to shed half its value is fruitless. Ain’t gonna happen. Nor did I ever suggest it.”

If the warning bells of real estate over valuation were sounded from 2008 when houses were 1/3 of what they are now, and those warnings continued for 10 years, then yes, the implication is that there would be a larger correction. Why else keep warning for 10 years about a pending correction if it’s a measly 15%. Why else advise to keep renting, investing in a portfolio, and waiting for a correction that is always just around the corner.

I highly respect your insights, your contrarian view, and ability to day in and day out educate for free those willing to listen. There is no doubt that you have, and continue to, perform an invaluable financial literacy service.

But I think, I, like many are a disappointed in the seeming capitulation on the hottest markets of TO and Van. It seems that all the bullish posters commenting on the never ending flow of newcomer buyers and hipster house lust that would sustain the market were right when they said prices will never substantively go down.

Its a very tough pill to swallow after ever rising rents, lack of security of tenure, and ‘missed capital gains opportunities.’

Boy, there will be a lot of humble pie eaten by husbands who ignored the (now correct) nesting instincts of their wives to buy and settle when the husband extorted the value and logic of renting.

For someone who claims to be educated, did you even read the article? The Bahrain reserve is an ecological disaster risk that makes that tar sands look friendly. There will be a 0% discount on Canada’s oil. Alberta’s oil projects are not going anywhere. Like it or not, it is an export lifeline for the country and the sooner those pipelines are approved the better.

Bloomberg Britain reported on the TO RE monthly numbers for March last night with much incredulity that houses in Canada could cost so much. Top line was prices down 17% and sales down 40%. Now Bloomberg has some global pull so the word will get out.

What will continue to slowly bring Canadian house prices down is rising rates. If you literally cannot afford the house, you don’t buy it. End of story.

The story of interest to me is the Bank of Mum and Dad as I suspect a lot of these gifted down payments from boomer parents are debts against the parents’ current family house. Said parents would have been counting on a low rate environment for many years to come. With rates increasing hard, how will this affect so many family situations.

#27 Barb
Update. We got a place! We don’t have to live in a truck! Woohoo!
And we can even have our supple and nimble poochez!
Thanks to God. What a town.
—————————————————–
Glad for you, Steve!
That was cutting it close!
Best wishes

front lines info… the b20 effect really kicks in now, just wait to see how much applicants get approved for (See Mattamy pre-con disaster)…. The next 3 months will be shitshow as borrrowers come to the realization that their purchasing power has decreased by 20%. Insiders all see a further pressure in decreasing prices for the next year. We’ll likely end up down another 10-15% by end of the year…. but as Turner has mentioned, it’s very local so downtown prices will always be more stable. The condo crash will come later……

My friend listed his 2009 investment condo in burnaby for 780k the assessed value as of last week no offers a 20k price drop and now all new floors which didn’t cost much. Next they are going to stage it I will let you know when it sells but not all condos in van are hot that’s for sure. Two others listed in building for about same length all still on market. Friends relished so doesn’t show days on market or. No sale let’s see how it goes…

#99 – Ross Kay has also said that houses in Vancouver [upper end] have dropped near 30% and this will spread to all areas…. without a doubt. Condos and townhouses?…. how much longer? Franco you don’t know that “prices will bounce back”, in time yes but may be a long time.

The economy is certainly growing in the U.S., but the Canadian economy is not nearly as healthy. The Canadian Real Estate Market, notably the GTA in my opinion will see a melt over the next 5-7 yearslike back in 1990.
Interest rates will continue to rise, pushing values down. The homes in the GTA and Vancouver are still incredibly over priced for the average family and this just isn’t sustainable.

If these items don’t nuke GTA housing in areas like Regent Park, Jane/Finch, Oakwood/Vaughan, Parkdale, or Mt Dennis, why do you suppose that’d be? Are they home to good schools? Large lots? Safe environments? high quality homes? Great local amenities? I suspect not.

————————

exactly. I think of areas like oakwood and vaughan and the breathtaking rises in some of these areas that are…basically, ghettos is absurd. They are still 416. The prices just don’t make sense. Go for a walk in those neighbourhoods, go to the corner store or mechanic shop and you tell me how the heck the people in those communities are paying $800k + for a house.

I sort of had a good idea what was going to happen to the stock market Wednesday after I saw silver kicked square in the teeth around 9:15 am the same day. Silver was the telltale sign. Just a headshaker but the same entities that moved silver also moved the market. You also have to keep in mind if the jobs report in America comes in hot this Friday then “they” have to boost the stock market skyward by the close this Thursday to keep the indexes above the 200 day moving averages if there’s fallout on Friday from the job’s report.

So, if the economy is still growing, and the economy is booming, rates will continue to rise. Jerome Powell, read his speeches, he is intent on normalizing rates and says even a 20% correction wouldn’t make him wobbly on his goals.

So rates are going up, Canadians have a sexual attraction to debt, and you are now recommending everyone jump in? Prices are barely even down.

After the fact I would have looked at the vacancy rates in the bigger cities in Alberta first. If the vacancy rate starts to move downward in most of the bigger cities that would be the time to buy. The real vacancy rate came in at 40 plus percent not too long ago in Calgary. The real vacancy rate being those who tried to rent out houses or units but they didn’t rent.

It’s a booleen, a coin toss, it’s based on a choice or a combination of bets.

Has zero to do with skin pigmentation or a social constructs.

Every single beast out there can make a bet and get rich. It requires risk. Safe spaces teacher talk ain’t going to cut it. They never took a risk. They go from cradle to grave afraid and they are your mentors.

I did make a comment yesterday around 7:15am on the DOW futures being down over 500 points “but they might be all green by the open”. They were all green long before the 4:00pm close. The U.S. dollar was flat from open to close… I wonder what the other variable was?

“But waiting for a 70% price collapse when the economy is growing, inflation rising, rates swelling and moisters heaving, is feckless.”

That was a very encouraging stock chart and rosy economic picture that you portray…if you’re an AMERICAN.

You know, your Comment above reminds me of the ad hominem the amateur RE investor rabble chanted in Calgary in the early 80s, until the unexpected happened…20% to 40% price drops over 2 years, followed by more painful price drops that went on for years later (YVR and 416 were not exempt either, no magic wand toting Merlin or Chinese Dudes or swarms of Wealthy Immigrants or ET stepping in to save them).

I can agree with you that the 70% number is unrealistic for a 1 year price drop but also recall, this is the largest RE bubble yet in Canada.

Thus, 70% is possible over a couple of years.

The early 80s HPI dropped by 20-40% in major Canadian cities (so much for the “all RE is Local” theory unless you want to drill down to minutiae neighborhoods as examples to maintain that failed narrative).

The current HPI dwarves, humiliates, makes Lilliputian the RE price peaks in the 80s, 90s and early 2000s.

What do you think will happens when the current gargantuan bubble bursts?

It will not be an orderly decline if history repeats, the price drops large and it will repeat thanks to Human Nature.

Re: #97 SimplyPut7 on 04.04.18 at 10:21 pm
Garth, are you trying to tell everyone we will be okay because when people find out we are not, the sky will fall faster than a cheap glass panel crashing to the ground from a downtown Toronto condo?
++++++++++++++++++++++++++++++++++++++++
Garth, hope you don’t post this if I will get sued for libel, but it’s my opinion, if that helps.
I am a former glazier who worked in the construction industry for 30+ years and I can tell you that if you think leaky condos were bad, just wait!!
A little history:
When developers first started constructing these high rise condos in the mid to late 80’s the installers had a huge battle with the developers because we could see the deficiencies in the design and refused to install the “window-wall” until the developers threatened to fire us all if we didn’t comply. We lost many days wages fighting this because of our dilemma. But the developers won.
We also never used to work when the rain was pouring down (we used to have what we called rain votes because no caulking would seal on wet concrete back then), but the developers said to install anyway. Burdened with the dilemma of building sub-standard walls that we were 100% sure would create leaks-mold-mushrooms growing (especially in Vancouver) or being unemployed and losing our own houses, most capitulated. We knew we would be back to replace most seals, especially between floors.
So these were built with the knowledge of failure and the condo buyer be damned. Granted, this was all a new type of design at the time but it was the developers who wanted the cheapest glass walls. The developers even had money built into the build price for these deficiencies and I found work for a couple years re and re-ing (repair and replacing) walls all over Vancouver creating a great amount of work for our trade.
Those new frame-less flat glass walls are held into the metal frame by mostly silicone caulking and a couple clips, so wait ten years and a mild wind and we will see oodles of them falling to the ground as the sun deteriorates the caulk and adhesion unless the caulk is replaced. The recent panels falling were new installs and just had bad seals, due to mostly contaminants causing substandard adhesion or just poor installs. So in 10 years or less those joints all have to be replaced with new caulk, especially the sides that get the most sun.
You’re going to see huge bills for caulk replacement in 10 years time costing probably double the initial install price as was the case with the leaky condos. The amount of time to cut that silicone out, clean the joint and then pump tons of caulk into them again will take at least a summer of men working all over your building. Make sure you keep the blinds closed, he he.
The 10 year building envelope warranty won’t save you, they have that worked out and 10 years is just enough time for the caulk to last.
The only buildings that I believe worth it are the ones that span just a floor at a time, with the frames set into the building at least a foot so you have an overhang and can limit the amount of damage of a leak to a floor or so. I have seen a whole side of a 20+ story building leaking from top to bottom after owners have moved in! Or buildings that have the very more expensive commercial curtain-wall, but what developers would use those, they’re the ones that fought for the cheap glass in the first place.
This doesn’t include the glass panel failing it’s own seal which collapses the glass, usually only 10 year warranties on those. That’s the discolored panels you see every once in a while on those towers. All these need to be replaced from the outside, so big money.
Just like Garth said, stay away from those buildings! And that is just the skin of the building, I have oodles of stories, I should get SM to ghost write me a book……..We can get drunk all day outside one of those buildings being built while I regale him with the shenanigans that went on.
As you can tell, I don’t own one of those.

“Last month we received an email from a distraught client in Ottawa who had just received a letter from his mortgage lender letting him know his mortgage maturing five months from now will NOT BE RENEWED.

Same time a Hamilton family called us to complain their mortgage lender had just sent them a renewal notice — they are welcome to stay but the new rate will be 7.99%!!

And only yesterday, another family from Richmond Hill sent me their mortgage renewal letter. The letter states the clients must first pay for an appraisal on their home, and the value of their home must be such that the new mortgage will be less than 65% of the appraised value.

Unfortunately, I believe we are going to hear many more such stories in the months ahead.

And it’s not just because of the impact of the new stress test on mortgage lending. Rob Carrick recently published an article where he discussed the impact of the stress test on renewing mortgages and refinances. Some people cannot refinance their way out of debt the way they used to. They don’t qualify anymore.

Mortgage renewals are going to be water cooler fodder for a long time, and it’s only just starting.

And the reason is a new International Financial Accounting Standard called IFSR 9.”

An excellent summary of the headwinds that confront YVR and 416 RE and other major cities.

There is nothing “LOCAL” in that reality list of yours.

People will beg, borrow and steal to make their mortgage payments – witness the current low bankruptcy and delinquency rates.

I suspect the Banks are reluctantly accepting months of no payments just to kick the can down the street hoping for RE to turnaround as in “some money is better than no money”.

Dangerous game.

How long that can last is anyone’s guess. Having said that, they will have to pay the Piper as has always happened.

The IFRS 9 is an interesting argument; however, it will take some time before investors clue in and the Banks’ Annual Reports will likely bury it deep in fine print until somebody sits down and crunches the numbers as to the actual value of the Assets claimed on the B/S.

All this is fake news that’s what got us here to begin with fake news suck and blow at the same time fake news and and dumb ass herd mentally…. hey who is the Sheppard of all these dumb asses anyway ?? Comments please. …?

That is exactly what happens. The economy crashes with each large RE correction. We are more vulnerable now as RE et. al. represents a larger share of GDP than in the past 3 decades.

If you think that somehow this will not happen, you must be very young indeed. Below is an image link to an embellished historical HPI chart in 1980 dollars adjusted for inflation.

Correlate the price corrections to recessions.

Note the % price drops, how quickly they transpire and the years of mild price drops that happen afterwards.

Worse yet, take a look at the year the chart ends.

That ought to give you an idea as to how gargantuan the current RE price bubble is. The fall from grace will be painful for all unless you cashed out awhile ago and as a result, are independently wealthy and can weather the coming economic storm – not the case for the vast majority of Canadians.

That might be the case if your job is correlated to RE or the FIRE industry, but if you’re in an inversely correlated occupation or sector, for instance, engineering, one’s purchasing power in RE should increase dramatically as the FIRE sector deflates relative to the rest of the economy.

So no reason to get caught up in Realtor scare tactics, unless of course, you are a Realtor or otherwise a heavy FIRE participant.

God knows that if the price had gone up they would have called up Mattamy and asked them to share the spoils.

————————————

That link makes me want to vomit. Apparently Mattamy put a gun to their heads and ordered them to buy those overpriced homes last year?

Mattamy have accommodated buyers in Whitby with a price matching program but will not accommodate Oakville buyers.

Mattamy are still profitable at these lower prices. This is a company that says it’s (sic) reputation is to help families and build communities, however they will not budge and would rather see 100+ families go bankrupt, become homeless and be unable to retire.

Maybe I should email and ask them if the prices had risen, they would have shared the profits with newer buyers to offset their (the new buyers) higher prices? you know, in the name of “building communities”?

So Garth, are you admitting that the massive gains in real estate are permanent? It’s normal for real estate to trike in value in 15 years as Toronto housing has? Looks like real estate is a better investment than stocks afterall.

Holy hell that “community for fairness” site is comedy gold! Garth, enough material here for several blog posts.

Favourite so far :

We struggle daily, with the stresses of our situation. Bullying tactics by the home developer, Mattamy, and the reality that our once solid futures are being sacrificed because we are being forced to take on unmanageable debt loads.

Residential is on sale in 705 ,905 , or sub B list areas in 416. Twenty somethings in 416 cannot buy condos fast enough as the pressure to gain a foothold is non stop.
The only factors that stop 416 are a recession and higher rates and then that’s only temporary. For those that have been on the sidelines and are looking to buy to live and grow , now is the time to jump in. Why ?Rates are still low, sellers have had some cold water splashed on their face and maybe receptive to a modified reality.

#77 Big Kahuna on 04.04.18 at 9:13 pm
“Communist China has been abusing the open trade environment for decades-total silence from the corrupt MSM-now Trump says no more and it is ‘Trump’s trade war’. Jeez.”

Reading through this story, I feel very concerned for the generation that is coming after me. Particularly the couple who decided to purchase a second house because they didn’t like the floorplan in their first house, and now want to get some form of taxpayer funded government assistance to close on the house with the better floor plan.

@#131 Myra
Perhaps it would be easier to create a chart showing New listings as one line, sales as another line and total inventory as a third line? Posting once a week or month
Rather than slowly filling the comment page with stats?

Garth.. I love your optimism, and of course your humor.. But yeah.. this farm team/worker bee economy of yours isn’t like America’s mate. Not even close. Challenges will be unprecedented in Canada for many. They already are beyond what you are probably aware of. Sure, there are areas in the GTA and Van that will be okay, but that’s always the case in any scenario. The problem here is y’all are staring in the eyes of a beast you’ve never dealt with before. Ever. Best of luck though.

I don’t really care if houses have dipped-still prohibitively unaffordable. I still see listings in Ajax for 930k…. I know people who bought 4 years ago the same house on the same street for 450k. Give me a break, this is hardly a correction. Returning to the mean would mean the house should be around 500k. Are you telling me these people will really accept that offer? LOL

“Even if people in Ontario started making as much money as people in Alberta during the peak oil boom in Canada, the cost of servicing debt is rising faster than income and the loan to income ratio on many homes is higher than 450%.”

That’s the way I see it. Pumpers shills and con-men and their marks have blinders on I guess.

The people who criticise the advice to start looking to buy, I think they’ve been infected by the romantic notions of real estate that have become prevalent the last ten years. This is the idea that you “fall in love” with a house, do whatever it takes to make a deal, and if someone overpaid to a greater extent than you were able to, you “lost.”

That’s dead wrong. My old man bought houses through the ’90s, about one a year as rentals. He’s also a bit romantic about real estate, being from the old country and all, but one sensible idea he had was the expectation that he might offer on up to ten houses before finding a buyer with whom he could come to terms. The other nine would be delusional, or simply insufficiently motivated to sell at the time. He had no issues walking away, and didn’t figure on meeting on price on any house before the third or fourth offer.

This is the mentality buyers need now. They need to lose the idea that they are ‘competing’ against other buyers for the right to overpay for a home. They need to ignore the fact that a lot of listing prices are nutty. You only know what a seller really needs by making an offer, and seeing how it’s signed back.

I know someone who just bought a home after failing to (four or five “lost” bidding wars) all through 2017. She got a measly four percent less than the listing price, but of course now has to pretend it was a “steal.” Worst of all, her first offer was accepted. I had told her to try twenty percent less, just as a start (and because I thought it was a reasonable price), but she balked, saying that she liked the place and didn’t want to lose it. That’s insane: she liked those five places last year, too, and “lost” them, but lived.

There are houses for sale, and the sellers now know the market is turned. It’s useless to look at the listing prices and decide that they’re too expensive- go make offers reflective of the actual market this year, and see if those houses are really for sale. Many won’t be, but some really will.

“Condos are a dumb move anywhere.” – Garth
——————————————————————–
Wait…..what?
But Brad Lamb says otherwise in the April 2018 edition (Volume 23-Issue 10) of that rag called City Post Magazine.
Ha ha!
Check out the gibberish that is being spewed in that issue’s “Real Estate Roundtable”.
Garth has participated in that farce in the past, but either quit doing it because it was a ridiculous joke, or they kicked him out for having opposing views to the shameless shills.
The cast of characters nonsensically blathering their pseudo-intellectual double-talk includes, among others, Brad Lamb and that dolt Tim Hudak.
Nauseating.

A typical real estate agent has an IQ of 95. They are typically financially illiterate and have only one mantra “buy, buy, buy”. Their job is to hype you into making a bad purchase.
Once they ruin your life the typical Ontario purchaser writes Kathleen Wynne and asks her for a bailout. No one
in the housing market is ever responsible for anything. Why should the taxpayer be responsible for bailing out people who purchased one million dollar homes?
Let the divorce lawyers have their field days. How many times do I have to give fathers advice to tell their sons that no means no when they get pressure to buy a larger house!

And stock valuations have come down 10% or 15% and look juicy. So, up she goes.

Garth, you sure are whipsawed by recent events, hey? Valuations are far from “juicy”. They aren’t terrible, but at a PE multiple of almost 25 on the S&P500, I’m not getting too excited. Yeah, it looks better than before, but less ugly is still ugly.

Not that I sympathize with the buyers of those Mattamy projects at the peak… but I am a bit surprised Mattamy couldn’t offer up 1-2 year mortgages to this handful of people and tell them to shut their mouths about it and not tell a soul.

Buying pre-construction is risky. I was doing this in 2013-2015. The pre-con pricing is always a bit higher than current day pricing and you’re really gambling as to whether or not the price will go up. But in my case, I bought townhouses and I was able to break even on my monthly costs with the rental income at the current rates. That gave me a 5 year buffer. Now upon mortgage renewals in 2020… Maybe I’ll sell some and invest in a 70/30 portfolio.

I’d say Montreal is okay value however there has not been much movement in pricing here (yet).

I have seen some places selling at a discount, but less than 10%, though real data is of course hard to come by.

They recently moved to regulate AirBnB more. Lazy airbnb landlords are like a rash over residential areas, presumably having vacated regular rentals in search of more yield. With prices flatlining and pressure on yield it will be interesting to see who works out they have to fold first. I think many will not figure this out early.

#149 Bob loblaw on 04.05.18 at 5:24 am
So Garth, are you admitting that the massive gains in real estate are permanent? It’s normal for real estate to trike in value in 15 years as Toronto housing has? Looks like real estate is a better investment than stocks afterall.

It’s not a contest. – Garth

——————-
I’m sure no one is curious to know if yesterday’s high winds tore off any shingles on their balanced portfolios. You can’t compare the two. I have a tenant moving out in July. Yay I’ll get market rent… But at what expense? I’ll be patient and wait for a nice retired couple because it’s seriously a jungle out there finding good people

After reading all the testimonials and nearly vomiting in my mouth from the extent of the groveling I have come to a few conclusions in this case.
1. The instinct of fear as always super cedes the instinct of greed the rats are exciting the ship.
2. It seems that 2 year olds are making the buying decisions for what would probably be regular upstanding individuals.
3. It looks like every one of these Morons intended to upgrade their abodes by locking in their costs in an upward market and rolling the dice on the upward value on the homes that they were already in. There was never any intention for buyers to have to make up a gap on the purchase price the 1.5 year wait was going to do that for them. I guess that went horribly wrong.
4. I said it once and I will say it again if there is any bailout from the Bank or government I am going to lose it.

I might be new and green but do these morons actually think they are going to get public support for their plights? Am I the only one thinks that a web designer wasted many hours in this idiotic plight?
I will be emailing Mattamy and express my support for the stance that they have taken. Builders are not the most virtuous of society but a DEAL is a Deal!! Period

The fact is Garth finally realized that things are never going back the way they were. He is claiming that he always said this all the readers of this blog apparently don’t remember that way. Myself included. At least he finally acknowledges that in YVR it really is different this time and by this time I mean the last 20 years and the next thousand. We are the new Hong Kong.

Hong Kong, funny. I have said BC is NDP-pooched. You just don’t know it yet. – Garth

Quite right and for the first time in 10 years of online reporting, the RAHB has not posted the breakdown of monthly sales by neighbourhood in Hamilton-Burlington. Based on the for sale signs that I see lingering in Ancaster-Flamborough, I can only assume it’s a bloodbath for sales vs same time last year, at least in the top end of the market. For the lone area of Dundas that they did post stats for, there was a 70% drop in March sales: 40 in 2017 vs 12 in 2018. With those kinds of numbers and the expected increased number of listings for Spring, I anticipate a buyers market and further erosion of prices, but only if buyers are savvy as Garth is now advising.

#166 Milly on 04.05.18 at 8:48 am
I don’t really care if houses have dipped-still prohibitively unaffordable. I still see listings in Ajax for 930k…. I know people who bought 4 years ago the same house on the same street for 450k. Give me a break, this is hardly a correction. Returning to the mean would mean the house should be around 500k. Are you telling me these people will really accept that offer? LOL

Wake me up when wages and housing make sense.

=======================

Absolutely. I will call it a correction when I see the price down by 50%.

You would also call it a ‘recession.’ Careful what you wish for. – Garth

If I’m reading all the data correctly it looks like the jobs report in America is going to come in on the extreme hot side tomorrow. It is possible I could be wrong. Citigroup getting on the buy list the day before the jobs report seems to be a tip-off the jobs report will be a blowout.

The U.S. economy is massive. Regardless of the recent stock market ups and downs, GDPgrew 2.9% in the fourth quarter of 2017. The U.S. generates over $18.5 trillion in annual economic activity, well over 20% of that of the global economy. Americans enjoy such a large economy because they specialize and dominate in a wide range of industries. Similarly, individual states specialize in some industries more than others, as you can see in our latest map.

We gathered the data from the Bureau of Labor Statistics’ Occupational Employment Statistics survey, which 24/7 Wall St. compiled into a simple list of iconic jobs per state. Our analysis uses something called the location quotient to capture how common something is in a given location. For example, petroleum engineers are relatively hard to find across the county, but you can find more than 50% of them in Texas. We mapped these so-called “iconic” jobs by color-coding their popularity in each state and we added the average salary as a reference.

This data paints an interesting picture of the U.S. economy. Given the right conditions, workers with an iconic job in their home states can be extremely well compensated. This is especially true for jobs requiring advanced degrees and special certifications. Texas stands out in the list of top five. More than 50% of the country’s petroleum engineers live there, raking in on average $140k each year. Another high-paying industry, commercial and industrial designers are concentrated in Michigan, where they make $81k. Fashion designers in New York also do well for themselves with $71k in annual compensation. These pockets for specialized skills can attract talent from around the country. If you want to drill oil, move to Texas.

Unfortunately, the sad news is that most workers with iconic jobs are not very well-compensated, probably because their jobs do not require any post-secondary education. Locker room attendants in Missouri and shampooers in New Jersey probably didn’t go to college. Another factor in holding down wages in some of these industries is the supply of labor. More than 50% of all the farmworkers in the country live in California. Since bosses can easily replace these workers, they only make $22k. Just because your job is “iconic” and often associated with your state due to its significance there, does not mean it will pay you well.

Our map also validates some of the preconceived notions Americans have about different parts of the country. Iowa needs a lot of soil and plant scientists because the state’s economy relies so much on agricultural production. Want to captain a ship for a living? Go to Louisiana. Trying to sell mining equipment? Open a location in Alaska. Western states like Idaho, Montana and South Dakota all have a lot of forest and conservation technicians. No surprise that Nevada houses the majority of workers in the gambling industry. Even Hawaii’s iconic job fits a common stereotype: dancers, with no median salary given by 24/7 Wall St., are the most iconic employees.”

I left a great area in Toronto a few years back in the name of financial prudence. I miss it every day. To make it worse, I believe now that I could have actually afforded it over the long haul. Tigther leash than where I live now, but the happiness return would be great.

I want back in – too bad the average price there is now around $1.2-$1.5 for an average/good place. I wonder if I can make my way back in.

“Absolutely. I will call it a correction when I see the price down by 50%.”

You would call a 50% reduction in home prices a correction? That would be a full on crash. As in, homeowners stripping properties of copper Queen Creek, AZ style and whole subsivisions empty. Arizona, which was crushed in 2008 saw 50% peak to trough. That was not a correction it was a catastrophe.

Would you call it a correction if the DOW hit 12k?

Garth is right, some of you have no idea what you are hoping for and how it will affect you. Your savings will be slashed, there will be no access to credit and people you know will lose there jobs. And the vulchers would still be waiting for a other 10% reduction. And those homes you couldn’t afford 4 years ago would be scooped up by investors. I mean if you couldn’t afford 500k 4 years ago when lending was loose and money was free how do these places all of a sudden become accessible when lending is non existant, your portfolio is down 20% and you are a single income family cause mamma lost her job.

This fanatsy land where homes recede 50-70% and everything else stays the same is the silliest stuff posted here. As if the middle class would be the beneficiary of a RE crash.

The best part of the Mattamy stories was the secondary lender financing rates of 10 percent with a 4 percent fee for doing the mortgage, on $200k that is around 2k/mth. I wonder how many other people are already in this situation.

I gather what Garth is pointing out is that the economy is moving into position to be able to put more gas in the gas bag, and it happens to coincide with a very high number of moisters with warm air still blowing on their crotches about RE. Maybe that’s what’s different this time. I don’t recall if the non-RE economy was as well positioned in 1990 as it is appears to be now, but of course the moisters were too young to have any RE hormones and GenX didn’t have the same level of RE lust or appetite for such vast amounts of debt so early in life.

After reading all the testimonials and nearly vomiting in my mouth from the extent of the groveling I have come to a few conclusions in this case.
1. The instinct of fear as always super cedes the instinct of greed the rats are exciting the ship.
2. It seems that 2 year olds are making the buying decisions for what would probably be regular upstanding individuals.
3. It looks like every one of these Morons intended to upgrade their abodes by locking in their costs in an upward market and rolling the dice on the upward value on the homes that they were already in. There was never any intention for buyers to have to make up a gap on the purchase price the 1.5 year wait was going to do that for them. I guess that went horribly wrong.
4. I said it once and I will say it again if there is any bailout from the Bank or government I am going to lose it.

I might be new and green but do these morons actually think they are going to get public support for their plights? Am I the only one thinks that a web designer wasted many hours in this idiotic plight?
I will be emailing Mattamy and express my support for the stance that they have taken. Builders are not the most virtuous of society but a DEAL is a Deal!! Period

=======
=======

There are over 150 comments on The Star’s page on Facebook regarding this disaster in Oakville. The majority of people who are posting are NOT sympathetic to the plight of these “investors”.

Most people I have met in the GTA who bought expensive homes for themselves, became a private lender to subprime borrowers, invested in a condo to flip or become a landlord, gave their kids down payment or bought homes for kids working minimum wage jobs. All of them knew prices were high and didn’t care because they thought the worse case scenario is that they would sell for a higher price when they were ready to move up or pass their properties on to the greater fool (and interest rates would stay low forever because no one would be able to afford their mortgage and foreigners were out to steal their land so they have to buy now).

And up to 2017 they were right (except the foreigners – where are they now?), banks, credit unions and private lenders freely refinanced any credit card debt or line of credit debt loaded with home improvements (kitchens, bathrooms and basements), HELOC loans to subprime borrowers or condos they purchased, exotic vacations, expensive restaurants and designer clothing they felt entitled to.

Now that interest rates are rising and B20 is in effect, banks have started to turn on these borrowers. The borrowers are shocked they are expected to have savings when making purchases such as a home (preferably a million dollars to buy a million dollar home – like rich people do in other world class cities).

Canada doesn’t have enough money to bailout all of the new home purchasers, including the 56,000 condos being constructed in Toronto. I’m sure Trudeau will pretend he does to give false hope like the US did during their downturn, but in the end people will find out only banks get bailouts, not the little people they stomp on.

I guess for now we will pretend everything is ok.

I wish the banking industry would come forward and explain how rising interest rates, B20 and IFRS 9 will impact future home buyers and large expenses on HELOCs to help prevent people from going into more debt if they are not going refinance consumer debt or give large mortgages the same way they used, and not act like we don’t know what’s going on.

You make some good points. But you presume too much in a patronizing way. There’s reasons for everything man. If you knew me in real life you wouldn’t condescend to me at all because you would respect me like everybody who knows me. I rose from a poor family full of abuse to my current debt and crime free life all by myself. I fought hard every day to make ends meet and raise my kids to be solid. You don’t know me. So you don’t get to adopt that tone.

To paraphrase is little green guy, “Buy or don’t buy there is no try.”

I’m reminded of an old traders saw, “Bottoms are processes, tops are events”. If this isn’t the process to the “bottom” then it’s just an interim pull back to a moon shot higher. I did notice the low volume pull back, which can suggest a large move higher in the TO data.

I gather what Garth is pointing out is that the economy is moving into position to be able to put more gas in the gas bag, and it happens to coincide with a very high number of moisters with warm air still blowing on their crotches about RE. Maybe that’s what’s different this time. I don’t recall if the non-RE economy was as well positioned in 1990 as it is appears to be now, but of course the moisters were too young to have any RE hormones and GenX didn’t have the same level of RE lust or appetite for such vast amounts of debt so early in life.

———————————————

The eldest Gen-Xer was 26 in 1990.

1989/1990 was almost entirely about Boomers selling to other Boomers.

Gen-Xers never took on so much debt because they benefited from rising wages and relatively low priced housing stock, just like the Boomers before them. Simply as that.

=======
There are over 150 comments on The Star’s page on Facebook regarding this disaster in Oakville. The majority of people who are posting are NOT sympathetic to the plight of these “investors”.https://www.facebook.com/torontostar/posts/10157621676
+++++++++++
The best….

Kevin Eddy Do some digging and what do you find. The Bashiruddin’s made $250k on the sale of their home in 1 year, tax free and they are complaining that the government should intervene? It appears that the Evans tried to sell their home on their own without using a Licensed Real Estate Agent. Any home on this street is well over a Million dollars, easily 400k above what they paid for, 4 years ago. The Khan’s made about $504,000 in 4 years.

Was any fact checking done on this piece before it was written?

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Kevin Eddy Correction…The Evans bought for $880k in ’14 and tried to sell for 1.7m in 2017. Similar houses sold for 1.4m. I’m failing to see where the market went down here. It skyrocketed and they tried to sell at an outrageous price.

“The big question is, are they willing to pay more if the prices have gone up? Builders have no control of the market.”

These folks were in line for a big capital gain.

Buy a pre-build house with a 1.5 year closing, and hold onto your own house until close to the closing date, then sell into a rising market.

You get: 30% year over year price increase in house values in the GTA, with house prices sure to go up forever. 1.5 years means a 45% increase in value of their existing houses.

+

Pre-build house also benefits from a 30% year over year price increase. So they were making 45% on their pre-build contract, and 45% on their existing home. How many of them planned to claim any of this as taxable capital gain is an open question.

What happens? Market crashes, and they lose 30% on their pre-build and 30% on their existing house, putting most of them underwater by a few hundred thousand dollars.

Why did this happen? Because people are idiots. Unbridled, total, and complete utter morons, with no ability to think for themselves, caught up in a lifestyle of the rich and famous, financed by cheap credit, a dream and a prayer, and a lot of emotion.

So what do they want? Governments to limit people’s ability to get themselves into awkward financial situations by acting without thinking? That is communism, isn’t it? You are not allowed to buy anything, because free markets are dangerous and people need to be protected for their own good?

There is not a single person on that website that isn’t fully responsible for their own situation. They need to stop trying to blame everyone else for what has happened to them, and take a good, long, hard look in the mirror.

Loot. How much you got or don’t got.
It’s a booleen, a coin toss, it’s based on a choice or a combination of bets.
Has zero to do with skin pigmentation or a social constructs.
Every single beast out there can make a bet and get rich. It requires risk. Safe spaces teacher talk ain’t going to cut it. They never took a risk. They go from cradle to grave afraid and they are your mentors.
Man up bitches. Only way you can lose it all or get a lear jet.
Make a bet.
…………………………………………………………………….
Translation> “I”m freaking loaded again on JD, my wife spent all of my money gambling again, I’m stuck here in my rental apartment with two scruffy little mutts and Ive run out of smokes!
Oh and Pum riko te praxaupp um vupp ventoupp hon Pum kot felow. Who rings vo pi Pum riko dit.

I would point out that to a great extent it is “renter-friendly” government policies like rent controls and extremely tenant-biased tenancy boards which have killed the incentive for anyone to build new rental units, and put them on the market. In most cities I’ve been in, it seems like almost the whole stock of rental properties were constructed decades ago, with new apartment builds being very rare, especially at the lower end of the market.

Love it, no sympathy at all. Who makes financial moves like this without allowing for possible setbacks like dropping real estate prices, or interest rate increases. They were gambling, betting on continued big increases in home values. They lost. Hopefully they and others will learn something from this.

Is this where we are now as a society? Where people who lose their investments because of bad timing are now splashed all over the media like it’s a national disaster? Omg. You made a bad financial decision. You not guaranteed to make money on every investment. You are not guaranteed anything in life. Sorry, but that’s the way it is. Christ. This woe is me bull needs to end. No one feels sorry for me because I’m priced out of the market, so I can’t feel sorry for anyone who overextended themselves and is paying the price. Life isn’t roses and sunshine 24/7. Sometimes, you go bankrupt. Sometimes, you make a fortune. That’s life.

#199 Penny Henny on 04.05.18 at 12:43 pm
anyone (except Mark) want to share their thoughts on why CPD is sucking so badly

It’s yield is lower than it was 5 years ago, despite the fact that it’s price is also lower than it was 5 years ago. The banks knew what they were doing when they started issuing rate resets instead of perpetuals.

A “scary” plan that would probably work just fine despite flying through a cloud of flack for even considering it:

Skip out of HS at 18, get married at 19, both of you immediately start work for 15.00/hr at Timmies. Go out together and buy a small “needs TLC” house in small town Ontario (one that has a Timmies) for 100K and start fixing ‘er up. You’ll have plenty of cash to do so because your mortgage payment will be under 500.00/month.

Now, employ some sweat equity. Heat with scrounged wood, 1 car only, buy everything used, do your own repairs – your quality of life will not suffer (indeed it may even increase) because you don’t live in a glass sky box and drive a new Audi.

Now get a side hustle going for a goal of 100.00 profit per week, and grab an hour or two of OT every week – both of you.

If you’re doing things right – you’ll be NETTING near 5K/month.

Your total all-in expenses per month should be around 2K, and for two folks making an effort – this should be more than enough.

By the time you’re both 20, you are set to start saving. Chuck 1K into RRSPs/TFSAs/taxable investments PER HEAD every month. Fill the shelters first, then pack it into taxable investments (or something better) once you’re maxed out. You can blow the tax returns on toys since you’re going to max out your RRSP limits essentially immediately.

You’ll still have near a grand left over every month. Put a few grand into home improvements and reno’s every year, learn, and do all the work yourself.

Do this, and by the time the house is paid for, you’ll also have 1.2+ Million (based on 5% avg./yr.) in the bank kicking out 56+K per year. You can retire modestly at 45 in a paid for nice house, with relative security if desired. Or keep working and saving till 65 and retire with 4 Mil.

Do the math. What kind of gross earnings does a GTA/YVR couple need to buy and pay off a SFD, plus simultaneously build a 7 figure portfolio and get it all done like dinner by 45?

RE: The Star “They bought their prebuilt homes at the market’s peak. Now they face financial ruin”

The buyers aren’t complaining that their houses went down in value and want someone to make up for their losses, they’re complaining that their lenders won’t extend financing to them anymore. They’re asking for debt-servitude and no one will give it to them! Except the usurers, of course.

#163 crowdedelevatorfartz on 04.05.18 at 8:30 am
@#131 Myra
Perhaps it would be easier to create a chart showing New listings as one line, sales as another line and total inventory as a third line? Posting once a week or month
Rather than slowly filling the comment page with stats?
—–

Your handle is Crowded Elevator Fartz, you speculate on the disposition on other poster’s fingers, and you are concerned that someone posting real estate data is wasting bandwidth.

I have to agree with TS at the beginning of the comments with rising rates. There is a real possibility at the sovereign level of those rates rising far more than anticipated.
I’m thinking things like NAFTA with a guaranteed currency rate as part of the deal forcing the BOC to maintain higher rates to defend the dollar.
We here in Canada are already labeled as a debt problem waiting to blow up by well respected agencies like the BIS. Our sovereign overall debt is actually not bad compared to other G-20 countries, its the citizenry that is the problem.
Every “mom and pop” down payment gift adds to the total and as our sovereign borrowing cost goes up so does the kids which worsens foreign investor outlook on Canada as a whole.
Why buy a Canadian bond to fund a socialist regime intent on driving out successful businesses and people not to mention a falling currency when you can buy another one that is more solid?
Dive in now? Yes in the past it would have been a good strategy but Canada’s financial position in the global community is not what it was due to the financial character of its citizenry and governments.
I just think there is a real possibility of external forces creating a rapid interest rate increase that could break even the Vancouver and Toronto markets.

I would like to thank Garth and the blog dogs for talking me out of buying my landlord’s condo. I will admit it’s in a great building in a great location, but when he offered to sell it to me privately for 590k, I knew I had to run in the opposite direction. Last week he revised his offer to 540k, still too high for me to risk it all on a one-bedroom unit in a 3-year-old building that will inevitably need to raise its maintenance fees over the next five years. The unit is now on the market and although I am not thrilled about having to move (or let potential buyers into my space), any feelings of fear have been replaced with a feeling of excitement, of knowing this was never the right choice for me, and for the possibilities I have before me (renting, maybe buying a house in the neighbourhood when the time is right financially). Sometimes you have to let something go to know it was not the right path for you, and for other opportunities to present themselves. So thank you Garth and team, you have made me stronger, wiser, and a little bit wealthier.

We are at historic norms, and the economy is advancing smartly. Looks juicy to me. – Garth
———-

Looking at that chart, PE has been higher a total of three times, if we include 1895. The historic norm on that chart is around 15 and juicy is below 10. I don’t think all equities are severely overpriced at the moment, but that chart is not helping your argument.

IHCTD9 – that’s “the plan” is it? Work at Tim Hortons so you can live outside urban centers? No teachers. No doctors. No programmers. Nobody can live in urban centers because housing has detached from wages. But you’ve found the solution.

@#43 – Stone – “When I felt my job didn’t provide the financial rewards I expected, I moved on. I believe in always earning a surplus above my lifestyle costs because I’m worth it and owe it to myself.

Those are some serious blinders you got on there buddy. Just because you are in a position to increase your own income does not mean that everyone else can do the same. Classic error of the successful.
Luck plays a big role in all of our lives. While it pleases the ego the take credit when we are successful, that doesn’t mean we weren’t lucky.

It goes both ways of course: if we make a poor decision and lose out, we like to blame circumstance rather than ourselves. But that doesn’t mean we didn’t do the right thing. Sometimes we were just were unlucky.

Happens to everyone both ways. Taking responsibility for your life and having humility are not mutually exclusive. Also, denigrating others is not a smart strategy in any circumstance, so be nice.

Maybe you should take some of your own advice: “Time to think outside your little box of preconceived notions.”

#220 ben on 04.05.18 at 3:13 pm
IHCTD9 – that’s “the plan” is it? Work at Tim Hortons so you can live outside urban centers? No teachers. No doctors. No programmers. Nobody can live in urban centers because housing has detached from wages. But you’ve found the solution.

Your post is just ridiculous.

The solution is to lower land costs.
____________________________________

The point is if a couple can do it on Minimum wage, how much better can you yourself do with a better wage or more effort. The math says it’s totally possible – so if you fail, that’s on you chumpy.

WTF are you talking about no doctors, no teachers etc? You think I assert that EVERYONE in the whole country needs to work at Timmies to get by? FFS, go back and read it again.

If you want to read a stupid post, look at the one where the guy just wants to “lower land costs”.

LOL! Yeah, that’s totally going to happen. The government will send out the tanks to force landowners to “lower land costs”.

No wait, the land owners will voluntarily sell for less once they realize nobody can live in urban centers because housing has detached from wages.

Hey Ben I hear where you are coming from but IHCTD9 is on to something. Internet is all you need for teachers (insert Khan academy here)and programming, if you need programmers. As long as a major hospital is 45 mins away your cooking with gas.

It’s plausible, however many people aged 18 – 25 years old think downtown Toronto is fun and interesting as well as most are brainwashed into believing the more education you have, the better chance you will have at becoming the CEO of any company you want as soon as you graduate school even though they have no experience. They will probably have student debt that needs to be paid off first, while renting or living with mom and dad to save more money and pay off the debt faster.

It takes time for them to find out how exhausting city life is and how complicated it is to move up in the company or maneuver through workplace politics. I was thinking moving out of the GTA is more for people in their 40s or 50s who realize they don’t need the city anymore to make it.

They would either have enough savings for a sizable down payment to have the $500 a month mortgage or even sell their city house/condo and buy the out of town home cash.

Then they could max out their RRSP, use the tax refund to max out their TFSA and put the rest in an investment account.

Most people then could be semi-retired and take contract full-time jobs where they would take vacations when they are between projects or work part-time permanently until they feel they don’t want to work anymore. They may even be able to keep their downtown jobs, as many companies allow their staff to work most of the week from home and only come into the office for team meetings or to meet clients.

After the US housing crash, they went through this movement where people became more concerned about being financially independent by living debt free and working for themselves or smaller companies than accumulating as much stuff as possible while maxing out their credit to compete with other indebted people in large congested cities.

What is a ‘Current Account Deficit’?
The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the goods and services it exports. The current account includes net income, such as interest and dividends, and transfers, such as foreign aid, although these components make up only a small percentage of the total current account. The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments.

In Ireland the housing declined despite the fact they they were also growing, and faster in real.debt excluded terms.

And they declined by 50-70 ^, the highest decline in the big cities.

I bet my shirt that housing in Canada will collapse with a crash, the like of one you have never seen with shacks in Mississauga, Vaughan, Scarborough going to their true value of 350 k, not 1.5 mil.

There is no talking this one out as we are used to.

You folks do not seem to understand the conditions required for a 70% price reduction. Think 15% unemployment, no credit availability, and a deep, starless recession. – Garth

Love it, no sympathy at all. Who makes financial moves like this without allowing for possible setbacks like dropping real estate prices, or interest rate increases. They were gambling, betting on continued big increases in home values. They lost. Hopefully they and others will learn something from this.

====================

Absolutely. Putting all eggs in one basket without financial cushion is simply stupid and reckless.

Gen-Xers never took on so much debt because they benefited from rising wages and relatively low priced housing stock, just like the Boomers before them. Simply as that.
——–

That. And they lived in the shadow of the 70s when paying the bills was often hard and people had to pay interest on money borrowed from a bank, even for a house. It would never have occurred to them to borrow a million dollars (or the inflation-adjusted equivalent).

Look at Japan, the world strongest export economy in the world for decades. They still can not recover 30 years after the 1989 crash! with house prices averaging 40-50 % form their peak.

They have a problem with population density. We don’t.
On second thought it could be 80 % + decline in GTA.
We don’t have the export and trade surplus of Japan.
We are nothing on world scene. Look at TSX.

Gen-Xers never took on so much debt because they benefited from rising wages and relatively low priced housing stock, just like the Boomers before them. Simply as that.”

My grandparents sold their place to boomers in 1989 so my impression was that it was a glut of wrinklies selling to boomers back then. You know … a generation of parents selling overprices houses to each others children. I didn’t know it was actually more boomers selling to boomers. Interesting to note!

Otherwise in early 90’s I don’t recall significantly rising wages in Canada. I started out in 1994 at $28k/year as a jr. engineer in Toronto and common wage increases at the time were only $1200-$1500 per year. I was able to ratchet up $5k/year a couple times by changing companies, but then it was back to $1200-$1500 raises per year, sometimes less. None of my friends and colleagues were doing any better than me (in fact most were doing worse) so if there were rising wages it certainly wasn’t for engineers in Toronto! At the time my married friends with dual incomes were buying those 1950’s red brick shoeboxes west of Avenue Road between St. Clair and Wilson for $250k – $350k but no way one young engineer’s income could afford that back then with the strict rules of 20% down, cap on mortgage at 3x income and 8-9% interest rates. That said I moved to California in 1998 for double the income and bought a house for $210k so maybe the wage increases to which you are referring occurred after 1998.

People are calling for lower land costs, it’s a huge political issue. This is on the agenda with the main political party in the UK. It’s also been a stated aim for Germany during a time which has seen it become an industrial powerhouse.

Canada’s problems are due to high land costs. It saps productivity. Lower land costs plus capturing increases in land costs to fund / pay for investment is the way forward.

You might not have read about any of those things and instead have some silly “camel through the eye of a needle” example for foraging and working at Tim Horton’s, whereas I have an example that is well known by many economists and gaining popularity:

Land value tax.

That’s an actual political policy. Why would you even post some “one size fits one” idea about foraging? What’s the point?

We need actual vision, and this is one such vision, not some silly idea that isn’t applicable on a wider scale.

Just imagine for a moment that the ‘unimaginable’ (currently when watching with the rosy glasses) happens and housing declines to its true value of 25 % from current valuations on average in GTA.

Imagine the inflation, with the INCOMPETENT trying to fight it and taxing you to death with less and less money to spend and ever increasing prices to the tune of 10-15 % yearly for 2 decades. Zero interest rates.

Why are you that stupid? RBC has one the largest holdings of residential mortgage’s in the country. What else would they say in a down market? Obviously, with prices continuing to go down, more and more people could opt out of paying their mortgage and walking away. Power of sales are already in affect in the GTA.

Not a chance. Mortgage arrears are stable and Canadians have no history of widespread default. The bank’s loan portfolio is also taxpayer-insured for all high-ratio loans. – Garth

Even if this is the correction houses are still not affordable for the average family, and condo’s are catching up. There really isn’t a lot of hope left. I don’t want a 50-70% crash, but how can an average family income of 80k-100k buy a house that’s 800k? or a 600k 1 bedroom?

No one sees this coming, but people will want to get in before interest rate hikes. in 1972 houses were selling for 10k in greater Vancouver. Same low interest rate environment .
Prices had already doubled in 1972. then inflation hit, and that didn’t end til 1982. Those ten grand houses were selling for 150k in 1980. Then they got knocked down to 80k.

“What else would they say in a down market? Obviously, with prices continuing to go down, more and more people could opt out of paying their mortgage and walking away. Power of sales are already in affect in the GTA.”…in addition to Fearless Leader’s excellent reply, I have to add this. You clearly do not understand or appreciate that statements like these from publicly traded companies MUST be factually accurate or the company risks prosecution from the regulators.

I know paranoia and conspiracy theories are easy to spit out but if a Canadian chartered bank were to be shown to knowingly and intentionally mislead the market then there would be incredibly quick retribution from the regulators. They have a fiduciary duty not to mislead the market.

Garth, good time to buy a condo in Toronto? Investment horizon of 5+ years. $900-$1000/sq.ft. for a box in the sky just seems ludicrous, relative to other cities in the world. I’d just hate to get priced out of the market…

I think you are completely correct Garth. But I also think your advice over the past several years is odd. You have been adamantly saying that purchasing a house is a terrible idea while the cost of houses has increased dramatically. And now that they have barely dropped at all, you are saying it might be a good idea to jump in. So are you now saying that your advice over the past several years was completely wrong. I am super confused…
And no wonder. Read more carefully and it might help. I advised people craving a home to make an offer in areas where prices have fallen by a third – which wipes out 50% of recent price gains. How is that hard to understand? – Garth

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.